BBC's Robert Peston warns of 'few years of sub par growth'

BBC economics editor Robert Peston has expressed fears that the global economy is entering “a few years of sub par growth”.

Peston, speaking at the LME Metals Seminar in London, said the structural problems that contributed to the “Great Crash” of 2008 had not been solved, while a slowdown in Chinese growth would affect the global economy and commodity markets.

“There is a genuine fear that having had a little recovery in the rich West we are entering a few years of sub par growth,” he said.

Peston said banks’ ratio of debt to reserves had increased over the past 30 years and reached levels before the Great Crash that meant a fall in the value of debt of a couple of per cent was enough to see a bank collapse. “The bailout was not far off the value of our entire GDP,” he said of the UK government’s intervention in the banking sector.

He said overall debt, including consumer, government and business, had increased. “It has not fallen during this period of recovery and that’s incredibly important,” he said.

“The last thing we want in this country is a significant increase in interest rates.”

Peston said the policy responses of quantative easing, strengthening banks, “some austerity”, a reduction in household debt, from 163 per cent of available resources to 140 per cent, and “modest economic reform” in the Eurozone did not “get to the root of the problem”.

“I would broadly describe this as an attempt to manage the status quo,” he said.

Peston said while GDP had increased it had not benefited those on low incomes because mid skilled jobs are “going abroad”.

He said the Chinese government was “re-engineering the economy to make it less dependent on debt-led investment” and it was “difficult to see how China cannot have a significant deceleration in growth”.

“The world’s biggest economy experiencing a slow down to three or four per cent growth would have a profound effect on the world and those of you in commodity markets,” he said.